Sudhir Shenoy, Chief Executive Officer, Dow
Chemical International Private Limited (Dow India)
India consumes only a tenth of chemicals, when compared with world average. For
a country with 1.25 billion people, the sector was valued only at $144 billion in
FY14, which shows that the market is yet to build the critical mass, even in sectors
that are not feedstock dependent says Sudhir Shenoy, Chief Executive Officer, Dow
Chemical International Private Limited (Dow India), as he discusses about potential
Dow – DuPont merger and its impact on Indian BU, Changing Indian Specialty,
Agrochemical & Textile Chemicals market scenario, Impacts of GST Bill & GOI’s Make
In India Initiative in an exclusive interview with Chemical Engineering World.

As per the recent reports, Dow Chemical
Co is considering a potential merger with
DuPont Co. which will create a multibillion-
dollar entity in India. What kind of
synergies will it create in sectors such as
agriculture and infrastructure & research
capabilities?

How will it impact Dow's specialty chemicals
business in India?

Over the last decade the chemical industry
globally has been experiencing tectonic
shifts in the form of complex challenges and
opportunities. The impending Dow – DuPont
merger is a major accelerator in Dow’s ongoing
transformation. The synergies generated by
this merger will have the potential to unlock
significant value in a highly competitive
marketplace. Overall, the transaction is
expected to deliver approximately $3 billion in
cost synergies with an upside of approximately
$1 billion expected from growth synergies.
The merger would entail setting up of three
independent publicly traded companies in
Agriculture, Material Sciences, and Specialty
Products respectively.

These companies will have powerful
innovation capabilities, enhanced
global scale and product portfolios,
focused capital allocation, and a distinct
competitive position. Their growth
prospects are outlined as follows:

Agriculture: will have the most comprehensive
and diverse portfolio with exceptional growth
opportunities in the near, mid and long-term.
The complementary offerings of Dow-DuPont
will provide growers across geographies with
a broad portfolio of solutions to enhance
farmer productivity and prosperity

Material Sciences: The complementary
capabilities will create a low-cost,
innovation-driven leader that can provide
solutions in packaging, transportation, and
infrastructure, among others. The newly
developed entity will be pure-play industrial
leader and will merge Dow's material
science portfolio (except electronic
materials) with DuPont's strengths in
performance materials.

Specialty Products: This division will
focus on unique businesses that are
innovation and technology intensive, and
share similar investment characteristics.
These businesses will bring together
DuPont's divisions of nutrition & health,
industrial biosciences, safety & protection
and electronics & communications, with
Dow's electronic materials business.

Post the merger, Dow India, in its refreshed
form, will continue to focus on material
sciences. With added strengths from DuPont
and Dow Corning, not only will we have an
enlarged footprint but also an expansive
product and solution portfolio. I am looking
forward to eventful years ahead of us.

As per reports, India is the seventh largest
player in the chemical business in the
world. It is forecasted that India would
become the fourth largest chemical
consumer in the world by 2025. In your
view how fast is the Indian market evolving
compared to global market?
How competitive are Indian chemical
manufacturers compared to their foreign
counterparts?

What are the opportunities for domestic
manufacturer in evolving Indian market as
well in matured international markets? How
important is sustainability in this equation?

What are the challenges for domestic
manufacturer in evolving Indian market as
well in matured international markets? What
are the risks and how will those be minimized?

In the coming years, India will continue
to grow as a consumer-driven economy.
With it strengthening its position as the
manufacturing capital for valued goods, the
GDP is expected to grow at 7.5 to 8 per cent
over the next three years. To support this
growth trajectory, the current government has
launched some critical missions to enhance
manufacturing, sanitation, and liveability.

Given that the chemical industry by nature
is the toolbox enabling sustainable products
and processes, it can play a major role in
making India a global manufacturing hub.
The chemical industry typically grows at
one and half to two times the GDP, and is
projected to grow at 12-15 per cent p.a.

How demonetization will impact India's and
chemical segment’s growth prospects is yet to
be seen. With a surgical strike on black money,
in the short term, the move may soften the
growth prospects across industries. However,
in the long term, it will only lead to higher
transparency and trust in doing business in India.

India consumes only a tenth of chemicals, when
compared with world average. For a country
with 1.25 bn people, the sector was valued
only at $144 bn in FY14, which shows that the
market is yet to build the critical mass, even in
sectors that are not feedstock dependent. On
the other hand, the chemical industry in India
is very fragmented and without economies of
scale, it would be difficult for smaller players to
remain competitive.

Like other emerging economies, India
continues to face challenges in the form of
lack of energy, infrastructure, and resource
management. While we need to address
these challenges, we also need to focus
on investing in R&D, IPR and establishing
operational standards for self-governance.

On the positive side, the industry is taking
proactive steps in embedding sustainability in
part of its DNA. This is evident by increasing
sophistication and adoption of global
standards in sourcing, manufacturing and
continuous innovation in product offerings.
Focused centres of research excellence
driven towards reducing the environmental
impact have also been set up.

Overall, I see the sector increasingly moving
from a commodity player to a value based
solutions provider. This upward integration
will help both big as well as smaller players
by creating more avenues to foster higher
collaboration across the value chain.

As per recent reports, Indian Textile
Chemicals market in India will be worth US
$2.5 billion by 2021. According to you, what
are the key growth drivers that have & will
accelerate the projected growth?

What role has Industrialization, surging
consumption of textiles in engineered
products and rapidly rising awareness
about the benefits of using textile
chemicals played in the development of
Indian Textile Chemicals Market?

On the macroeconomic front, India is one of
the fastest growing consumer economies in
the world, with a perceptible rise in disposable
income. With the sector opening up for 100%
FDI in textiles and retail, more international
players and technological knowhow are
expected to make inroads into the country.

The competitive advantage India has over
many countries is a steady flow of skilled
workforce in the sector. Textiles is the second
largest employer after agriculture, and
increase in both labour and capital availability,
has enabled India to be the 2nd largest cotton
and polyester producer in the world.

Increasing number of leading players is
establishing their presence in India. Alongside
promoting healthy competition, it has also
developed a more organized ecosystem that
supports this growth. Today, India has a wellestablished
distribution trajectory that feeds
into constant demand generation in form of
exports. Rapid development of the sector has
further led to increase in stewardship practices
such as safe and environmental friendly
practices and adherence to the EHS norms.

With push under 'Make in India', textiles are
expected to grow at an annualised rate of
13% per annum over a 10-year period. The
growth could be two-fold:

Deepen niche in traditional avenues
such as apparel, garments, handicrafts

Diversify into newer high value add
products such as air bags and wearable
technologies (both electronic and
medical)

Both these paths have immense export
potential and can further strengthen India’s
position as a textile ‘solution’ provider on the
global map. To support this, the government
has announced a slew of measures such
as reduction in custom and excise duty,
setting up of Technology Upgradation Fund
Scheme (TUFS), and Integrated Textile
Parks. These, among other measures
will make textiles more According to Tata
Strategic Management Group report on “Next
generation Indian agriculture: Role of crop
protection solutions’, Indian agrochemicals
market is expected to reach $6.3 billion by
FY20. In your opinion, what would be the key
growth drivers, opportunities, challenges and
strategies to reach these numbers.

The Indian Agriculture sector has been
facing critical challenges, thus causing an
imbalance in the country's food chain. How
Agrochemicals can play a significant role in
overcoming this imbalance?

The Indian Crop protection industry is growing
at a healthy growth rate of above 8% p.a. and
nearly half of Indian crop protection industry
output is exported. Having a strong cost
advantage; India will continue to be a major
supplier to the quality conscious global markets
for generic products, provided we enhance
investments in R&D and regulatory expertise.

The demand for crop protection products
is driven largely by food needs of an eversurging
population, which in turn highlights
the need for productivity enhancement. In the
backdrop of declining resources and climate
change, intensive agriculture practices
that involve sustainable and safe modern
technologies (modern irrigation, efficient
germplasm & other crop protection solutions)
have become important. It is equally critical to
arrest losses caused by pest damage during
and after harvest.

To counter the adverse perception around the
crop protection industry, regulatory bodies,
government, industry, and academia need to
join hands. Product stewardship, judicious use of
solutions, and freedom from spurious pesticides
should be stringently driven. The industry and
its key players need to proactively engage and
communicate better with stakeholders to build
trust and promote goodwill.

Please talk about innovation and R&D
portfolio of Dow India and what roles will
its operations in India play in the global
R&D strategy? Please share insights
into plan on expanding R&D centres in
direction of same?
The government has consistently emphasized
use of science and technology to advance
precision, productivity and sustainability.
The impetus on developing infrastructure
to support industrialization and making
Indian cities smart and digitally enabled are
important indicators of the 'change within'.

Dow India's aggressive investment in R&D
programs and capacity building, along with
collaborating with academia, think tanks and
industry are directed towards establishing
India as a priority market. Our India R&D
vision is to continue to grow and establish a
fully integrated global centre of excellence,
including technical service, application
development and research capabilities
that accelerate delivery of a market aligned
technology portfolio. Major developments
are unfolding in this space, and we will share
details in due course of time.

Your thoughts on Goods & Service Tax Bill?
Once implemented, GST will affect all aspects of
business in India, from decisions on investment
location and product pricing to logistics and
supply chain optimization. It will be a crucial
reform that facilitates India’s development
trajectory. As a ripple effect, it is also likely to
have an impact on India's international trade by
promoting ease of doing business.

GST implementation will go a long way in
addressing India's perception of a challenging
investment environment, laden with a
complicated tax system since a myriad of
existing central, state and interstate levies
had previously increased tax burdens. The
rollout will act as a major boost to India's
appeal to attract investments from multinationals
and will add momentum to growth of
the Indian economy.

For a long time, Indian manufacturers
have complained about the inverted duty
structure, which has been an impediment
in improving industry competitiveness. With
the passage of GST bill, we are expected to
move towards a one nation one tax regime,
which will further bring down costs in the
manufacturing sector - thus making it more
competitive in the global arena.

Please share your thoughts on
GOI’s Make in India initiative?
While ‘Make in India’ for consumption in
India is a huge opportunity to take India to
the next level in manufacturing, it needs
to provide enough impetus for ‘Make
in India’ to export. We need to make
manufacturing more cost-effective; more
importantly we need to make it compliant
to global standards, whether in quality,
resource utilization, safety or minimizing
environment impact.

To enable 'Make in India', we need efficient,
sustainable technology and innovative
product applications that can build scale
and ramp up production faster, yet in
a sustainable, resource efficient way.
Right now, regulatory hindrances are a
challenge in technology transfer to India -
we need stronger on-ground enablers like
infrastructure and water, cleaner and faster
permissions as well as globally comparable
IP protection and other law enforcement.

Over the previous year, there have been
significant announcements of investment
by various countries in automotive, pharma,
public health and infrastructure sectors. This
directly translates into growing opportunities
for Dow materials and technology. If 'Make
in India' and other similar initiatives address
some of the aforementioned issues, newer
technologies and product applications will
come to India much sooner. Other factors to
consider in making India a manufacturing hub
are feedstock availability, cost positioning and
access to strong logistics.

What are the future plans of the
company in India?
Having been in India for many years, we are
positive about the growth prospects in the
region. Our focus is on customer connect
and local innovation has helped us cross
the significant milestone of US $ 1 billion
revenue in 2014 and 2015 and we are
looking to double our growth in the coming
years. We have evolved into being a partner
to our customers; by creating and providing
solutions that reflect deep understanding of
our customer's business.

Our most pertinent growth enablers will be
Sadara and our Application Development and
Technology Centre (ADTC).

Sadara Chemical Complex, a $20 Billion
project is our joint venture with Saudi Aramco
and will house 26 different plants. India will
benefit not only from feedstock integration,
but also from consistent supply of products,
in-market commercial-supply capabilities and
resources. In addition to this, establishment of
the Application Development and Technology
Center (ADTC) will help provide application
development support to other regions, making
India the hub of our innovative solutions.

So far our mainstay industries have been
infrastructure, transportation, consumerism,
energy, health, plastics and water. Alongside
these developments, a focused push towards
home and personal care, pharma and food
solutions, and microbial control will help us
generate more value. Synergizing strengths in
our post-merger era will set us on a definitive
growth path.